HIGHER fuel prices, disruption in supply chain, inflation and a higher risk of a recession and the likely downward revision of growth this year are among significant impacts on Fiji’s economy from the now protracted US-Iran conflict in the Middle East, the Reserve Bank of Fiji (RBF) has warned as it announced yet another month of keeping the Overnight Policy Rate (OPR) at 0.25 per cent, unchanged for the sixth consecutive year. “The impact of the US-Iran conflict on the Fiji economy is expected to materialise through a number of channels, including higher fuel prices, an increase in inflation, disruptions to the supply chain and through tourism from our key source markets,” RBF Governor Ariff Ali said.
“The International Monetary Fund has recently revised down its global growth outlook for 2026 to 3.1 percent, noting that growth could weaken further if the war persists and oil prices increase sharply.
“As a price taker, Fiji remains vulnerable to extended periods of high global fuel prices, which could increase the cost of living, constrain household spending, raise business expenses and delay investment, ultimately dampening growth and, in worse cases, heightening risks of a recession.
“At the same time volatility in global oil markets could weaken travel sentiment and increase airfare costs, potentially impacting visitor arrivals in the months ahead. Given these developments, GDP growth for 2026 is downward biased,” Mr Ali added.
For now, annual headline inflation remains in negative territory, with higher fuel and food prices from the war and the recent Tropical Cyclone Vaianu yet to kick into CPI data.
Foreign reserves at around $3.4 billion as at April 30, 2026 is “adequate”, sufficient to cover 4.9 months of retained imports of goods and services and are expected to remain comfortable over the medium term, according to Mr Ali.
Domestic economic activity continued to be supported by the tourism sector, with visitor arrivals expanding by a robust seven per cent in the first quarter of the year.
“On the demand side, consumption activity has shown signs of moderation despite support from growing household incomes, strong remittance inflows, and increased employment.
“In contrast, investment activity remains positive, consistent with increases in new investment lending and construction-related imports, as well as some moderation in building material prices.
“Looking ahead, supply side pressures, including rising fuel and freight costs, shortages of skilled labour and a more cautious wait–and–see stance by businesses in an election year, present potential constraints to investment activity.”
